The Ashcroft Loophole

Tweet I thought that last night's Dispatches programme from Channel 4 went a little bit over the top in its treatment of the Tory funding scandal. I've never been a particular fan of 'doorstepping' unwilling interviewees, and the 'drama' of being 'excluded' from Cameron's little meeting was wholly unnecessary as well. Apart from anything else, the story stands up well enough in its own right - it doesn't need that sort of treatment.

There wasn't a lot that was new, however. In large measure, this was a story already covered by the newspapers in some depth. But as long as the Tories continue to refuse to deal with the key questions, it's one that won't go away.

The issue of where Lord Ashcroft lives is of comparatively minor interest. It was useful mostly in highlighting the way in which Cameron refuses to answer a very simple question with a straight yes or no. It makes him come across as shifty and devious - he's surely bright enough to understand that failing to simply say 'yes' when asked whether Ashcroft has kept his promise to live and pay taxes in the UK will inevitably be interpreted by most people as being a 'no'.

But the real issue remains about the legality and morality of the Tories' funding. In the case of their hedge fund backers, the question is primarily a moral one. Many of us are blaming the activities of these sorts of people for bringing the banking system to its knees - how can the Tories justify being funded on the profits? Merely repeating the mantra – 'the donations are legal' – is simply not good enough. Do they, or do they not, think that there is a moral dimension here as well?

In the case of Ashcroft's millions, the donations seem to be sailing very close to the wind. There's a good explanation here by one of the contributors to the Sunday Times article. In essence, the company used as a vehicle to donate millions to the party was making a trading loss in each of the last three years in which it made large donations. Those donations served to increase the losses significantly.

Now there's nothing illegal about a company which is making a loss deciding to increase the scale of that loss by donating to a political party, but how is that loss to be funded? In this case, it seems that the losses (and therefore the entire donations to the Tories) were funded by issuing more shares, all of which were then purchased by another Ashcroft company based in Belize.

So, in effect, there is no doubt at all that the money donated to the Tories came from Belize – a transfer which would have been illegal had it been a direct payment. It highlights a key failure in the legislation, which only insists that the donating company is 'trading' in the UK. Clearly, those drawing up the legislation would have made the logical assumption that donations would have been made from trading profits, and I can't blame them for making that assumption. I don't think that I would have considered the possibility that a company would deliberately choose to make massive losses in order to donate, and sell more shares abroad to cover those losses.

It's a loophole, obviously, and people who depend on loopholes rather than the intention and spirit of the legislation will always look dodgy. It didn't help the Tory case for last night's programme to show one of Lord Ashcroft's (very) few appearances in the House of Lords; an opportunity which he used to seek to argue that the law should be changed to allow him to continue to fund his party from abroad. A flagrant attempt to open the floodgates doesn't look like any sort of indication that his party recognises the need to close the loophole.